I see the issue as the % of foreign funding in our resi market. Any persistent "risk off" trade will see the AUD go south concomitantly our cost of OS funding rise leaving the banks in the situation that they will need to increase rates and or reduce lending despite what the RBA may do. When I say sentiment it is more the worlds risk appetite and their view of our markets primarily and our reaction to those conditions secondarily.
In a similar vein I am keeping an eye on the Feds operation twist, it could well result in a sell off in the ten year note that they cannot contain. The ten year dictates the US cost of mortgage funds which in turn feeds into our markets. If US bonds do enter into a bear market that could well change the game as well.
There are other things that are concerning, odd things like the Greek bond haircut being 'voluntary' and not being considered a default. That is an end run around the credit default swap market and one that I suggest will be challenged. Should it hold the CDS market will price in (is pricing in?) the event and will drive up the cost of insuring certain debt which will in turn limit debt issuance which will increase competition for all available funds and tighten all debt markets. Admittedly that is drawing a long bow at this point but its odd things like this that get legs and catch people off guard. The unintended consequences of, and market reactions to government actions are ripe with opportunity to spear us off in an unsought direction.
Really who knows but the situation looks loaded with potential.